FilmOn X, Broadcasters Square Off in Ninth Circuit

TV networks took aim at FilmOn X Thursday (Aug. 4) in oral argument before the Ninth Circuit Court of Appeals, with much of the argument focused on whether the internet is a communications channel under Congress' definition of a cable system eligible for a compulsory license under the 1976 Copyright Act.

The argument was in front of the three-judge panel of Diarmuid O'Scannlain, Consuelo Callahan, and Johnnie Rawlinson.

A compulsory license would allow FilmOn X to deliver TV station programming from the major networks at a government-set rate, rather than having to negotiate for it individually.

FilmOn X (formerly Aereokiller), which streams video content online, says it is the equivalent of a cable system and should have the same compulsory license. Fair use groups Public Knowledge and the Electronic Frontier Foundation agree, having filed briefs in support of FilmOn.

Fox and the other Big Four TV nets—with the support of the National Association of Broadcasters and many others—say it is not entitled to the license.

U.S. District Court Judge George Wu sided with FilmOn X, which prompted Fox and the nets to appeal to the Ninth Circuit to overturn that decision.

In oral argument, the TV networks' lawyer, Neal Katyal of Hogan Lovells, said the fact that FilmOn X "now claims" that it is a cable system "contradicts the text of the Copyright Act, contradicts its purpose and contradicts what every judge looking at this found," except judge Wu.

He said the compulsory license for cable is narrowly defined as "just that," a cable system. He said FilmOn X is trying to convert a "mousehole" of an exception into "an elephant."

Katyal said FilmOn X would have to show that the text of the Copyright Act relating to the license (Sec. 111) unambiguously favors their interpretation, which he called a near-impossible task in light of other judges who have ruled the other way. He also pointed to the Copyright Office's conclusion that internet services aren't covered under Sec. 111.

Judge Callahan pointed out, in the Supreme Court hearing on Aereo, the Supreme Court asked whether Aereo couldn't just get a compulsory license—Aereo said it was not like a cable service, simply a technology for accessing over-the-air TV via the internet.

Katyal said it was telling that after that question was posed, nothing wound up about it in the Supreme Court opinion itself—which went against Aereo—but that there is a footnote about Aereo claiming it was not a cable system.

The networks say that FilmOn X is trying to assert that everything that transmits is a communications channel.

Judge O'Scannlain seemed skeptical about arguing that the internet was not one of the things that was a communications channel. "The Internet is not a communications channel," he asked. "Correct," said Katyal, at least for the purposes of the 1976 Act. O'Scannlain pressed him and the lawyer conceded it could be "in the realm of possibility" but said to read the statute that way would be to read the clause applying the license specifically to "cable" out of the statute.

Katyal pointed to the "local," mom and pop system, language in Sec. 111 and said it was inconsistent with a national service like the internet. He also said that cable got the license in part because it was heavily regulated by the FCC.

Judge Callahan asked what in the definition of cable system supports the networks' argument that a retransmission service must control the means of transmission. Katyal said he did not even have to get to that question because FilmOn X is not a communications channel—geographically located with wires and cables—under the Sec. 111 definition and does not have end-to-end control. He said the language is that a facility must "make a transmission to a subscriber," and FilmOn X does not do that.

Arguing for FilmOn X was Ryan Baker of Baker Marquart.

Baker said three years ago the TV nets were arguing FilmOn X was like a cable system. "Today we agree. We are like a cable company," he said and entitled to the Sec. 111 compulsory license. He said Katyal was trying to insert requirements into the statute that don't exist. For example, he said, there is no requirement under the Sec. 111 definition that there be any local component or control of a transmission path.

He said Congress is aware of language that would have required control of the transmission path to meet the cable definition and didn't use it. Baker was asked whether he thought that it was "unambiguous" that there was no transmission path required. He said yes.

After the Supreme Court concluded that remote antenna farms collecting TV signals and delivering them to subs over the web was not simply a technology facilitating access to over-the-air TV, FilmON X and Aereo both pushed the FCC to redefine their services as cable systems, but Aereo eventually wound up filing for bankruptcy.

Baker said that when Congress created the license in 1976, it meant for it to apply to future technologies. He said at the time the disruptive technology was cable. Now, he said, one of the those new technologies is the internet, and it is "undisputed" that the internet consists of wires, cables and microwaves, "the very things that are mentioned specifically in section 111 as being examples of communications channels."

O'Scannlain pointed out that the language talks about secondary transmissions by wires, cables or microwaves, adding: "Are you suggesting that making secondary transmissions by internet includes wires, cables and microwaves."

"I'm arguing that the internet is an example of another communications channel," Baker said.

O'Scannlain asked if all those were part of FilmOn X's system and Baker said yes. "It strains logic not to include the internet in the definition of communications channels," he added.

Baker said that the Copyright Office has not rejected FilmOn X's petition for a compulsory license but has instead waited to see what the courts will ultimately decide.

O'Scannlain pointed to seven decisions in the area of compulsory license, with the Wu decision granting the license to FilmOn X the only outlier.